5 Tips on Managing Your Disposable Income

Even those who have some disposable income left over after they have paid their monthly bills can easily lose track of their money and end up with nothing left in the week before their pay cheque. Even worse, they can find themselves putting purchases on a credit card and sliding into debt. Put these tips into practice and take better control of your monthly disposable income.

Tip 1: Pay Your Bills First
The worst mistake you can make with disposable income is thinking that you have more money to spend than you actually do. When you get your pay cheque, make sure to set aside the amount you need to pay your bills and meet your commitments so that you know exactly how much you have left to spare.

Tip 2: Plan for Big Purchases Well in Advance
In the run up to Christmas, family birthdays or holidays, even a generous amount of disposable income can be strained and stretched. Rather than having one month where you must spend all your spare cash on presents or other such purchases, put a savings plan in place. Even just setting aside 10 percent of your disposable income every month will make a big difference to your lifestyle when the time comes for larger purchases.

Tip 3: Consider an Emergency Fund
Not all big purchases can be planned for. An ill pet or a great bargain on a holiday or much longed for piece of furniture can mean that your disposable income for that month is slashed, or you might feel pressured to borrow against next month’s salary. Putting a small amount of money aside each pay cheque can act as a cushion so that an emergency does not have to be a disaster. By having this emergency fund separate from your savings for Christmas and other gifts, you don’t have to worry about sacrificing holiday joy to pay for a surprise bill, and you can avoid debt.

Tip 4: Try an Envelope System for Better Control
Some people find it difficult to keep track of how much money they have spent and how much they have left, this leaves them in a feast or famine situation where they live it up for a week or two but then have no disposable income left in the last weeks of the month. If this sounds like you, an envelope system might be ideal. Just get a few envelopes, one for each category of your discretionary spending – eating out, clothes, socialising etc. Split your money up into each envelope based on how much you think you will spend in each category. The visual representation of your funds can help you to make better choices.

Tip 5: Keep Track of Your Spending
Spend a month writing down what you have spent your discretionary funds on. At the end of the month you will be able to assess your spending. You might realise that the money spent on your daily coffee would have paid for a few lovely meals out, and decide to invest in a Thermos flask.